First year my son earned income and has a W2

[edmond_me]

This is the first year my son has earned a salary, as he did some part time work. 

I cannot enter the W2, my understanding is that he needs to be filing his own tax records, and state that someone else can claim him (that is me).

But because he earned under $1000, IRS rules and publication 929 (https://www.irs.gov/publications/p929) leads me to believe that this amount is 12550.

Is this the correct understanding? Can someone confirm this? He doesnt have to file and I dont have to enter that W2?

[VolvoGirl]

How old is he?  

You don't include their income on your return. It would only go on their return if they are required to file one.  To file a separate return for your dependent you need to set up a new account.  Online is only good for one return per account.  You can use the same email address for 5 accounts.

How to start a new online return

Https://ttlc.intuit.com/questions/1894512-how-do-i-start-another-return-in-turbotax-online 

Be sure on their return they check the box that says they can be claimed on someone else’s return.  If their only income is W2 and under 13,850 they do not have to file a return except to get back any withholding taken out.

Filing requirements for a dependent

https://ttlc.intuit.com/community/children-dependents/help/do-i-need-to-file-my-own-taxes-if-i-m-a-d...

[Hal_Al]

This year the filing threshold is $13,850 (not $12,550).

You do not report his/her income on your return*. If it has to be reported, at all, it goes on his own return. Your dependent child  must file a tax return for 2023 if he had any of the following:

1.          Total income (wages, salaries, taxable scholarship etc.) of more than $13,850 (2023).
2.          Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1250 (2023)
3.          Unearned income over $400 and gross income of more than $1250 (2023)
4.          Household employee income (e.g. baby sitting, lawn mowing) over $2600 ($13,850 if under age 18)
5.          Other self employment income over $432, including money on a form 1099-NEC

Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.

In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.

*If his only income is from interest and dividends, Alaska PFD or capital gains distributions shown on a 1099-DIV, there is a provision for entering it on your return, using form 8814. Enter at Less common income / Child's income.

[edmond_me]

Thanks for the quick reply. He is only 16, a minor.

So if I understand correctly, he doesn't need to file, since his income was way less than the amount. 

The only reason he would need to file is if he wants to reclaim the social security tax withheld?

Thanks again for your quick reply

Edmond

[Hal_Al]

Q. So if I understand correctly, he doesn't need to file, since his income was way less than the amount. 

The only reason he would need to file is if he wants to reclaim the  tax withheld (box 2 of the W-2)?

A. Yes

[VolvoGirl]

He can't get the Social Security tax in box 4 or Medicare in box 6 back.  Only the income tax withholding in box 2 and state withholding box 17.  

[edmond_me]

Ok thanks so much for the clarification. I was confused, it’s the amount in box2 not box4.

thanks again

[VolvoGirl]

Oh, but if he wants he can contribute to a Traditional IRA or a ROTH IRA for 2023 until April 15.  He could file his own return to show a contribution.  

[traceybis]

My college son earned 8000 this year and would like to get his withholding back.

what form does he use?

and does he claim his Bright Futures scholarship on the tax form?

[Vanessa A]

Everyone files a form 1040.  He will just walk through the steps of entering his personal info and W-2, then TurboTax will calculate his refund. 

If the scholarship was used for anything other than education, then yes, he will claim this as taxable income.   He can enter this in the 1098-T section where it asks about any additional scholarships. 

[Hal_Al]

Every body uses the same 1040 form, since 2018 (and it gets longer every year).  There is no more "short form" or "1040-EZ" form.

Scholarships that pay for qualified educational expenses (QEE - tuition, fees, books and other course materials) is tax free.  Scholarship amounts that exceed QEE is taxable income, on the student’s tax return. Room & board are not QEE.

If box 5 of the 1098-T exceeds box 1, TurboTax (TT) will treat the difference as taxable income, unless you enter additional QEE at books and other expenses.

If you are entering the 1098-T, on your return, to claim the tuition credit, TT will advise  you that your student has taxable scholarship income.  It will not (and should not) enter the taxable scholarship on your tax return. 

______________________________________________________________________________________________

There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this  if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket. She would only need to report $5000 of taxable scholarship income, instead of $6000.

The IRS actually encourages use of this technique. From the form 1040 instructions: “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040 and IRS.gov/EdCredit".  PUB 970 even has examples of how to do the “loop hole”.